Juniper Networks Had Lousy Earnings. It’s AI Strategy Could Push the Stock Higher.

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One month ago,

Juniper Networks

stock looked as good as dead. Now, it’s rallying, and it may just be getting started.

On July 26, Juniper (ticker: JNPR) reported earnings after the close, and they certainly seemed to be disappointing. Juniper posted a fiscal second-quarter profit of 42 cents a share, missing forecasts for 46 cents. Its earnings guidance wasn’t much better. It said it would earn 45 cents to 55 cents during the third quarter, while analysts had been modeling for 54 cents.

At first, it looked like it would be a bloodbath. Juniper stock, which was already sitting just above long-term support at $27, a level that had held since June 2021, opened down 6.5% at $26.24 on July 27, and seemed to be heading to $25. But then, buyers started coming in. Juniper stock finished the day at $27.71, down a far more palatable 1.3%. More importantly, it finished the day above $27.

A deep inspection of the numbers indicates the reason. Juniper’s sales were quite strong. Its second-quarter revenue of $1.27 billion was just ahead of expectations for $1.26 billion, and it guided to third-quarter sales of $1.3 billion to $1.4 billion, above forecasts for $1.29 billion. The disappointment, if anything, was driven by continued supply-chain issues, which bit into margins. As those problems fade, Juniper’s normalized earnings could head for $3, according to KeyBanc analyst Thomas Blakey, who has a $36 price target on the stock, up 22% from Friday’s close of $29.39.

Now, the shares looks ready to break out—and they probably should. It isn’t just that Juniper is a reasonably priced tech stock, though at 14.6 times next 12-months earnings estimates, it trades at a discount to the

S&P 500’s
17.9 times. It’s that Jupiter now looks to have a found a strategy that could differentiate it from its competitors and drive growth well into the future.

In the world of computer networks, acquisitions are typically tactical, driven by the desire to access a particular market, with new products often remaining unintegrated with one another. Juniper seems to be taking a different approach. In 2019, it bought Mist Systems for $405 million, and Mist has become central to Juniper’s transformation into a cloud-based, artificial-intelligence-driven networking company.

With Marvis, its AI engine, Juniper has a product that can learn a company’s network, track performance, and even identify and fix problems before they are noticed by humans using the network, says Needham analyst Alex Henderson. Now, it’s bringing this technology from the enterprise campus—industry jargon for a network in one geographic location—to its other businesses, even making four acquisitions to help move in that direction. “It’s a distinctive shift-left strategy,” writes Henderson, who has a price target of $38 on Jupiter. “It’s a coherent vision….It’s a big deal in our opinion.”

It should be a big deal for investors, too.

Write to Ben Levisohn at [email protected]